Oil Price and Output Growth in Nigeria

The study examines the effect of oil price on output growth in Nigeria, while comparing real output with potential output. While employing secondary data from 1980 to 2020, the Auto-regressive Distributed Lag (ARDL) method which analyses long and short run relationships among variables was used. For the effect of oil price on real output growth, long run estimates show that all variables employed do not exert significant influence on real output growth. Short run estimates reveal that all variables except the two lagged value of GDP, current value of labour, one and three lagged value of human capital have significant effect on real output growth. It was established that oil price in the current, one, two and three lagged periods positively affect real output growth. For oil price and potential output, the study was able to establish a positive effect of oil price on potential growth in the short and long run. The study concludes that Nigeria as an oil-exporting country is highly sensitive to changes in oil prices. Therefore, economic policies that will regulate the country in a way that eliminates the economy’s dependence on oil production and direct the country to more sustainable growth is recommended.